Western allies to expel Russia from global banking system

KYIV: Western allies announced sweeping new sanctions against Moscow, including kicking key Russian banks off the main global payments system, as a defiant President Volodymyr Zelenskiy said Ukrainian forces were repelling Russian troops advancing on Kyiv.

Seeking to ratchet up economic punishment for Russian President Vladimir Putin over his invasion of Ukraine, the United States and its European partners also said they would impose restrictions on Russia’s central bank to limit its ability to support the rouble and finance his war effort.

“As Russian forces unleash their assault on Kyiv and other Ukrainian cities, we are resolved to continue imposing costs on Russia that will further isolate Russia from the international financial system and our economies,” the Western allies said as they escalated their punitive response.

“We will implement these measures within the coming days,” according to a joint statement from the United States, France, Germany, Canada, Italy, Britain and the European Commission. read more

After initially shying away from such a move largely because of concern about the impact on their own economies, the allies said they committed to “ensuring that selected Russian banks are removed from the SWIFT messaging system.” They did not name the banks that would be expelled but an EU diplomat said some 70% of the Russian banking market would be affected.

The move – which the French finance minister had earlier called a “financial nuclear weapon” because of the damage it would inflict on the Russian economy – deals a blow to Russia’s trade and makes it harder for its companies to do business.

SWIFT, or the “Society for Worldwide Interbank Financial Telecommunication”, is a secure messaging network that facilitates rapid cross-border payments, making it a crucial mechanism for international trade.

Sanctions on Russia’s central bank could limit Putin’s use of his more than $630 billion in international reserves, widely seen as insulating Russia from some economic harm. The new measures will prevent Russia from “using its war chest,” according to Ursula von der Leyen, president of the European Commission, the European Union’s executive.

Since Russia’s large banks are deeply integrated into the global financial system, new sanctions imposed on them, such as cutting them off from SWIFT, could have a spillover effect, hurting trading partners in Europe and elsewhere.

Ukrainian Prime Minister Denys Shmygal said in a Twitter post early on Sunday: “Thanks to our friends … for the commitment to remove several Russian banks from SWIFT.”

The Kremlin said its troops were advancing again “in all directions” after Putin ordered a pause on Friday. Ukraine’s government said there had been no pause. “We have withstood and are successfully repelling enemy attacks. The fighting goes on,” Zelenskiy said in a video message from the streets of Kyiv posted on his social media.

The crisis has galvanised the NATO Western military alliance, which has announced a series of moves to reinforce its eastern flank. While NATO has said it will not deploy troops to Ukraine, a string of countries are sending military aid.

US President Joe Biden approved the release of up to $350 million worth of weapons from US stocks, while Germany, in a shift from its long-standing policy of not exporting weapons to war zones, said it would send anti-tank weapons and surface-to-air missiles.

Amid a barrage of cyberattacks blamed on Moscow, Ukrainian Vice Prime Minister Mykhailo Fedorov said his government will create an “IT army” to fight back. Fedorov also called on Saturday on SpaceX billionaire Elon Musk to provide Ukraine with the company’s Starlink satellite broadband service. 

A Ukrainian presidential adviser said about 3,500 Russian soldiers had been killed or wounded. Western officials have also said intelligence showed Russia suffering higher casualties than expected and its advance slowing.

Kyiv’s mayor Vitali Klitschko said there was no major Russian military presence in the capital but that saboteur groups were active. Klitschko, a former world heavyweight boxing champion, later told a German tabloid the city was “nearly encircled”.

UN refugee chief Filippo Grandi said more than 150,000 Ukrainian refugees have crossed into neighbouring countries – half to Poland and many to Hungary, Moldova and Romania. Russia’s Defense Ministry said its forces had captured Melitopol, a city of 150,000 in southeastern Ukraine.